With stocks locked in a rather tight range today, it gives us time to look for some stocks that might be poised for a move. With the Market Volatility Index (VIX.X) hovering up near the 36 level, option prices on more volatile stocks can be expensive and should the needed move come in the direction of the trade, the higher volatility levels currently seen can actually take away from gains should volatility drop. This may have some options traders looking to implement trades on less volatile stocks where a move isn't as affected by options volatility.
One stock that looks to be consolidating in a tighter range is shares of Kellog Company (NYSE:K). After breaking above the $29 level and giving a triple top buy signal back in June, the stock traded higher to the $34 level. Since late August, the stock has pulled back to the $28 level and may be poised for a rebound.
Kellogg Company - last nine months
Shares of Kellogg (NYSE:K) had a nice run from the $26 to $34 level for the three months of June-September, but have been in a phase of profit taking since that time. The past 10-sessions show the some consolidation hear the $29 level. With the 200-day MA upward trending and 38.2% retracement near the $27.84 level a bullish trader may be taking a look at some call options at current levels. Should we see some positive price action above the $30 level, then we'd expect to see MACD begin to turn higher, perhaps cross over, and have the stock finding buyers. We've place a retracement bracket on the stock from the October 26, 2000 lows of $21.60 to a longer-term bullish price objective of $38 taken from the point and figure chart. This gives traders some levels to be monitoring along the way. This type of stocks might me more appropriate for bullish traders that like to buy some time and give a stock time to work. Any bullish trades made here would be followed with a stop just below 38.2% retracement and rising 200-day MA. The January $25 calls (KAE) are offered $4.60 and the out of the money January $30's (KAF) are offered $1.35.